What is this world coming to when GS and MS are rumored to dissapear when they are earning $$$$?
Are you serious with that question? Do you know what they do?
Earnings and cash aren’t the same thing.
They make money
They also have this thing called the balance sheet.
Naked shorting by hedge funds, my friend. If you have enough selling pressure even good companies cannot bear the pressure.
I bet Paulson wouldn’t let GS go down. He would do something.
Nike Wrote: ------------------------------------------------------- > They make money Dude if they make money doesnt mean that they have cash. “cash is king”
Wall St cutting the hand that feeds it. This is just a bubble in reverse.
Well, it’s deleveraging. Money costs more to borrow, so you can’t afford to be as levered. You sell stuff to bring costs down to what you can afford. Problem is, everyone is selling stuff for the same reason. This sends prices down. Now you have fewer assets as collateral against your margin. You need to sell more. You push the price down. Now other people have to rebalance to accommodate fewer assets on the positive side of their balance sheets. They sell. … repeat as necessary. Then some people find that they can’t sell enough to cover their loans. They default. Lenders get nervous, raise credit spreads. Go back to step 1. At this point, even if you weren’t leveraged, your assets have taken a huge hit. However, if you don’t have liquidity (i.e. cash) needs, maybe you can tough it out, but it still doesn’t look (or feel) good. When does it all end? It’s got to end at some point, but deleveraging almost certainly implies a market bottom that is as (ball-park) unusually low as the market top was unusually high.
can we go back to some business 101 here guys! bad management is at play here … and all that we are seeing are symptoms of the fallout … there is a massive gap that appears not to be covered by regulators, rating agencies, analysts … that gap to ensure bad management is held accountable earlier than when the shit hits the fan… apparently shareholders of lehmans, back a few years, had riased to management about the concern of the securization book … well either they did not dig in more, or they got bamboozed by ‘smart’ people with risk models … and backed off … …sorry some activist hedge fund managers do try to fill this gap, but sometimes are outvoted by investors (institutional-probably)
So how much does a Goldman or Morgan Stanley needs to borrow in a day to survive? Ballpark figure? I guess its something like if I owe 100k on a credit card and I use that money for a profitable business and I pay a monthly payment. I keep on making payments, but all of the suddent the bank wants me to pay 25k which I don’t have and I try to find other sources for the 25k, but there is none. I begin to scramble to sell assets but I can only sell them for a low price. However, my business is still profitable. The bank gives me 3 days or I have to declare bankruptcy. I could understand this happening to lehman or Bear. It isn’t fair to GS or MS. They are making money. You know what the government should lend out money then, but only to profitable businesses.
If MS or GS are genuinely profitable, then a bank will find it a good deal to lend to them. The problem seems to be that since all the banks are lending to each other and they also are worried about having enough cash to meet their own needs, the system is frozen up. So the government may need to be a lender of last resort, but it shouldn’t charge a pittance for interest.
There’s a fund being set up by all the banks to lend to one another, but some of these banks are having trouble themselves, i.e., Citibank.